JOHN TAYLOR: Mining in Queensland is big business, and this week it got a little bigger. British gas company B-G group announced a friendly takeover bid for QQueensland gas company valuing the company at more than $5.5 billion. It's big money, especially since coal seam gas wasn't really on the mining radar in Queensland a decade ago. Now there's another group of companies coming forward that want to do something else new with coal - convert coal underground into gas. And not everyone is happy.
(JOHN REPORTS ON COAL GASIFICATION) JOHN TAYLOR: In Queensland, coal is king. Digging it, burning it, selling it coal is worth billions and underpins the economy. But there is some new players emerging who want to use is coal in a different way converting coal into gas underground.
DR LEN WALKER, COUGAR ENERGY: We have the capability of using coal that's not useful for any other purpose underground to produce what I would call industrial gas.
MONICA RICHTER, AUSTRALIAN CONSERVATION FOUNDATION: Well if Australia's going to deal seriously with the twin issues of climate change and Australia's oil vulnerability this is definitely not the way to go.
GEOFF WILSON, ENERGY MINISTER: It is important that we don't pick winners with technology that's not for Government.
JOHN TAYLOR: In Queensland's Surat Basin, the three major companies have pilot programmes turning underground coal into gas. It works like this. Two holes are drilled into a coal seam. The coal is ignited at one end, and in a controlled conversion process a series of chemical reactions take place that produce a mixture of gas called "synthesis gas".
DR LEN WALKER: We have a coal source at Kingaroy where we've established 73 million tonnes of coal resource, and we have a defined program now over three to four years of establishing a pilot burn first, and then constructing a power station of 400 megawatts in two stages.
JOHN TAYLOR: Dr Len Walker is Australia's old man of underground coal gasification; a self described ageing entrepreneur. For 25 years he's advocated that UCG as it's known makes sense in Australia.
DR LEN WALKER: It started off in the former Soviet Union because Lenin and Stalin considered there was a means of getting coal that was deep without sending miners underground. So it was a good socialist objective. Well it's a good humanistic objective nowadays to do the same thing and look it at it the same way.
JOHN TAYLOR: In Brisbane's leafy west lies the headquarters of another UCG player Carbon Energy. It makes much of its links to Australia's national science agency, the CSIRO.
ANDREW DASH CARBON ENERGY: We believe it's very important. Our entire approach to this technology, how we target our sites and how we efficiently bring the energy to the surface has been born out of 10 years of scientific research; it's the most thorough development of this type of technology in the world.
JOHN TAYLOR: Carbon Energy wants to produce gas for power generation, and to make chemicals for agriculture and mining.
ANDREW DASH: A very major facility with a capital cost of over a billion dollars, generating over $30B worth of revenue over its 30 year lifetime.
JOHN TAYLOR: The largest player in the paddock however is Linc Energy, which has already spent $50M on its project at Chinchilla.
STEPHEN DUMBLE, LINC ENERGY: We're now moving on with the development of our first commercial operation which will be a 20,000 barrel a day commercial plant again at Chinchilla, producing clean liquid transport fuels from coal that's gasified underground.
JOHN TAYLOR: Last month it produced its first liquid fuel.
STEPHEN DUMBLE: Very significant for our business and also very significant for Queensland. This is a world first for Queensland.
JOHN TAYLOR: And with Australia's reliance on foreign petroleum only dramatically rising, the company believes there's a ready market.
STEPHEN DUMBLE: At 20,000 barrels a day we'll produce enough diesel to satisfy about half of Queensland's current diesel consumption.
JOHN TAYLOR: While Linc Energy dreams of a Queensland Middle East, others are worried.
MONICA RICHTER: Well just as the Queensland Government put a moratorium on the oil shale development industry of 20 years I think a moratorium should be put on the development of coal to liquid, underground gasification, all of these technologies that are not necessarily yet proven, that do have a horrendous green house impact.
JOHN TAYLOR: Monica Richter from the Australian Conservation Foundation says a new way using old coal is not the future.
MONICA RICHTER: We really need to be moving away from our reliance on coal as part of our strong economy and looking at what the 21st century technologies of clean green technologies need to be invested in.
JOHN TAYLOR: In the farming country of the Surat basin there are also concerns about subsidence, the water table chemical residues, and carbon emissions.
GEOFF WILSON: Well I bring an open mind to this question. One of the concerns that legitimately raised is around the environmental impact of this technology and I think people fairly recognise that it is technology that is unproven in the Australian setting.
JOHN TAYLOR: The operators say don’t be afraid.
ANDREW DASH: We very much refute those elements; the key focus of the CSIRO's work has been around environmental performance, around safety and efficient extraction of coal.
DR LEN WALKER: To say that you shouldn't use UCG here because you might damage the groundwater, is equivalent to saying you shouldn't mine underground because you might kill people.
JOHN TAYLOR: Another question UCG players face is can they co-exist with the Coal Seam Gas industry a proven and multibillion dollar part of Queensland's energy scene.
GEOFF WILSON: Once the coal seam is burnt underground then the coal seam gas embedded in it is also burnt. So the challenge for both sectors of the coal industry is to work out an acceptable way for both industries to be able to coexist.
DR LEN WALKER: Well I can't say whether they hate our guts or not. I've met and I know a number of them and I know one or two of them who are extremely co-operative.
JOHN TAYLOR: Paul Zealand is from Origin Energy, which is involved in coal seam gas.
PAUL ZEALAND, ORIGIN ENERGY: I've got nothing against Underground coal gasification I just don't understand it yet, I don't think the State understands it yet. It's got a lot of development to do. But we shouldn't sterilize a large area of what are some of the best coal seam prospects in the world for future experiments. We should contain that to a relatively small area.
JOHN TAYLOR: There is court case at the moment over a tenure dispute but the UCG companies believe there's enough room for everyone.
STEPHEN DUMBLE, LINC ENERGY: The amount of coal reserves that exist in this State are very significant you know several hundred billion tonnes of coal. So there is more than enough room for all of these industries to coexist and in fact play useful parts in the economic prosperity of the State.
PAUL ZEALAND: Let’s not threaten the fantastic opportunity that we've got ahead of us with an experimental technology which is yet to be proven which we know has got a high carbon footprint compared to coal seam gas which is a low carbon technology.
ANDREW DASH: The Surat Basin is ideal for underground coal gasification; it has some of the best coal in the world for our process.
JOHN TAYLOR: The State Government is examining if the industries can co-exist, and Cabinet is expected to look at the evidence soon. But few it seems are expecting the Government to completely rule out this emerging part of Queensland's energy industry.
ANDREW DASH: In due course we will be applying for that production licence and would anticipate that that would be granted in due course.
DR LEN WALKER: In terms of the outcomes and the simplicity of the whole process it's extremely interesting and very attractive and I think there's no doubt that it will have a long term future.
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